Want to insulate your portfolio against losses? Check out TopBuild (BLD). It works. (December 18, 2017)
BLD
We are looking at TopBuild ( NYSE: BLD ) here. I put this on our growth stock list a while ago and then I mentioned here that this thing was buyable and it is; I think it still is actually. This is an insulation installation company (say that fast three times). They install insulation. They have got 130 offices or locations. It is a wide company; I think it is mid-cap stock so it is not some big massive company but these are ones we like.
Just look at this, this is the way this stock trades. Sideways consolidation then a big pop, a big move higher and then another sideways consolidation, a pop and then this is a little bit different but another sideways consolidation; this is the way this stock moves. There was no news on this that was a real market moving event, at least that I saw. Maybe it was an upgrade, maybe somebody else knows, I don’t know. But in my view, this is still a good buying opportunity.
Here is the way you would normally make this kind of trade: Say this is a stock that you are interested in getting long, maybe it is back here, this is a great volatility squeeze. A breakout here; the time to be buying was around $67.00, on the breakout, if you weren’t buying it down here. It was about $67.00 and then you can see what happened. You would still be okay here because on our 3-part squeeze analysis you got the squeeze, a breakout, that is phase 1. And then this is a pullback, that is phase 2, which was a little bit low but it was also intraday, right?
Then you are back here and this low is still holding, it is still holding, still holding barely, barely. Now it is not holding so maybe you get shaken out of there, Seriously, that’s okay, that is trading. Maybe you get shaken out but maybe you stay in because you can make a case that the 50-day moving average is holding up. It is doing okay there. Support is here. The stock did fall basically through the entire channel or at least back deep into this one. And then this would be the next time to be entering; when you would set an alert at 69.50.
You say, “You know what? I don’t want to watch this thing every day but if this puppy pops up to a new high I want to be buying.” Or you set a buy stop at 69.50 forget about it. You set a buy stop at 69.50, you are not buying it here at 68.50 or 60 you are saying, “If the stock hits 69.50 I want to buy this stock.” So just put it in motion and then, Boom! the stock does what it does. You are in, maybe not at 69.50 because it is a market order but definitely by 70.00. So now you are up 5 percent, actually more than that, 6 or 7 percent and you are riding the stock. That is the way you might trade this type of thing.
Now, what do you do now? If you are long, and I am, I will raise my stop to maybe just a little bit below 70.00 just to lock in at least a break even or maybe a slight profit. But know that this stock does trade around. Look at how it does this here: It could shake you out at $55.00. Well now the stock is up 35 percent since that time. So you really need to keep a pretty loose stop on this. Unless you are trading very actively, then go ahead and do that. But if this is more of a position trade for you like it is for me, you have to be okay with letting this stock pullback a bit.
One thing you could do, and then I will let you go, is a partial stop. Whatever your position is, I certainly didn’t expect it to run up 4 percent today, happy that it did, so maybe you trade around that and set a stop or just outright sell 25 percent of your position. If the stock starts trading below this level, literally right down here, then you sell part of your position, take those profits. And then if the stock pulls back you could buy it back. If the stock instead continues to go up higher at least you got 75 percent of your original position.
That is how I am trading TopBuild ( NYSE: BLD ), I hope this works for you. Simply put, I don’t think this stuff is done going up. This is institutional buying here and they don’t buy stocks one day just to flip them the next. It may pull back a bit; may give it a little bit of a rest and that would be a good thing. It would give you an opportunity to get a better entry but this is not Jimmy Shaker day. This isn’t the day that marks the top of this stock.
Free Chart